Modern central banks keep attempting to manipulate prices to a different and “better” outcome than the market would provide, but what does this achieve?
Pretty much down to a man, the Founders were hard-money guys. Nowadays, money is mostly a matter of keystrokes—of the Fed’s fiat. That changes everything—the economy, the workings of our institutions, the Constitution and its political economy. In my continuing effort to educate myself on this stuff—belatedly, in my dotage—I’ve just finished reading two fine books.
One is Benn Steil’s account of The Battle of Bretton Woods. The battle was between John Maynard Keynes, a die-hard Brit; and Harry Dexter White, a Soviet spy. Somehow the good ole U.S. of A won: go figure. I learned a ton of fascinating stuff. Particularly impressive is the author’s clear sense that the macro-econ giants, for all their towering intellect, were (and are) basically winging it. Over the decades, I think, it’s become increasingly obvious that none of them have wung very well. Even so, we entrust more and more power—over money, and the stock market, and unemployment rates, and retirement accounts—to unelected central bankers. Not a pleasant thought.
In search of comfort—more specifically, in the hope that it might be possible to revive constitutional thoughts and arguments for institutional arrangements that would provide more economic and political stability—I picked up Richard H. Timberlake’s book on Constitutional Money. I gathered useful historical information from the author’s “Review of the Supreme Court’s Monetary Decisions,” from M’Culloch to the Gold Bond Cases. Alas, by way of constitutional thought and theory, I found little to be learned.
On the very first page of the Preface, the author cites Section 8 of Article I, which provides that Congress shall have power to (inter alia) “coin Money, regulate the value thereof, and of foreign coin, and fix the standard of Weights and Measures; and Section 10 of Article I, providing (inter alia) that “No state shall … coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in payment of debts.” And then he writes:
Those passages taken together imply, first, that any legal tender money can only be gold and silver “coin,” and, second, that Congress’s monetary power is limited to managing the gold and silver content of those coins. The Constitution does not prohibit banks and other institutions from creating common money managed by “the people,’” but it clearly denies the states and the federal government, by implication, any authority to change the base of gold and silver.
Respectfully: not a single clause of this passage is remotely covered by the text. E.g., Section 10 shows that the Founders knew how to prohibit one level of government from doing specified things. If they refrained from imposing the same limitations on another level of government, the omission must be deliberate. No matter how much you want the “implication” of anti-state prohibitions to run against the feds, you have to acknowledge that the text and structure cut the other way. And you can’t crank up a constitutional de facto gold standard by implication and then harangue every justice from John Marshall on forward for an excessively loose construction of the Constitution. Regrettably, though, that’s the basic strategy of this book.
The libertarian fall-from-constitutional-grace myth-making isn’t just inaccurate but in effect, though surely not in intent, poisonous. The Founders had very firm opinions about money and banks. They could have imposed a gold standard, but didn’t. They could have chartered a national bank, but didn’t. Why not? Any serious constitutional thought has to start with that question.